Blog Post On: 2/20/2010

Last week we noted that there were bullish technical factors showing up in the markets. Technical factors are still bullish. There are underlying economic issues shown on the MTR Economic Model (MTR-EM) that raises a concern for the coming months.

Just for clarification, the MTR-TM back-tested returns are from holding a trade from one signal to the next without stops. Traders should always use stops and would have been stopped out of short positions prior to the market up call on 2/17.

MTR-TM: Market up signal fired on 2/17/2010

• Trend is still up
• Prices are touching the upper 2% deviation band and the trend may slow
• MACD crossing zero is bullish. MACD crossing zero back-test results are 34% accurate.
• RSI over 50 is bullish
• Volume Steady supporting the uptrend

 


Major Indexes: All major indexes are in an uptrend. As noted last week two of the three major indexes broke the downtrend and were moving up.

 

ADLine: The NYSE and NASDAQ Advance/Decline Line (ADLine) have all moved up with the indexes. This supports the uptrend.

MTR-EM: The MTR Economic Model shows that economic conditions that support consumer spending has deteriorated further.

Year over Year (YoY) real-wages (Green Line) are down almost -8% compared to last year. Secondly employment levels (Blue Line) are down further.

The primary concern is the continued deterioration in real-wages. Even if unemployment levels are high, if real-wages are up YoY consumers will spend and this will support economic growth and stock prices follow. The MTR-EM shows that consumer spending will slow since YoY real-wages have fallen substantially.

The MTR-EM can be seen as a leading indicator of what can be expected in 3 to 6 months in the market. Since the MTR-EM has continued a downward trajectory it ties into the outlook from Ned Davis Research that the market will trend downward in Q3.  

 

Blog Post On: 2/14/2010

The MTR-TM called the market down turn a few days after the up-trend broke. The MTR-TM does lag turning points in the market and it does so in order to make few but accurate calls.  A review of the major indexes (in the purest sense) the trend has recently changed. In other words the down-trend has broken and most of the major indexes have followed through.

MTR-TM: The MTR Stock Market Timing Model has not issued a buy signal yet but there are indications to take a moderate bullish stance.

• The MTR-TM turned up week-over-week and broke zero to the upside.
• RSI touched 50. Movements above RSI 50 are bullish
• Volume looked good on market up-days
• Downtrend was broken

 

 

Advance/Decline Lines: The NYSE and NASDAQ ADLine downtrend was broken.

 

Major Indexes: The NASDAQ and Value Line indexes broke the downtrend. The NYSE has not confirmed.

Just as a side note, the % of stocks over the 200 Day MA was a good indication that a market top was coming when it was posted back in early January.

Blog Post On: 2/12/2010

Weekly EIA updates for energy shows projected energy consumption for 2010. Current high inventories have been bearish for energy including natural gas even with the large snowfall in the U.S.  In the short run lower energy prices should help boost consumer spending. Still over the next few months the outlook is for a sell in May and go away season for the market.

The MTR-TM helped members to go short or get out of long positions.  Ned Davis Research forecasts the market to rally later in February until the end of April. We will keep an eye to get back into the market long on the next MTR-TM signal.

Global Crude Oil and Liquid Fuels Consumption.  EIA has revised upward slightly its projections for global liquid fuels consumption growth in this Outlook, as the Asian-led recovery continues.  China's apparent liquid fuels consumption in December increased by 0.9 million barrels per day (bbl/d), or 12 percent, above year-earlier levels, as China's economic stimulus package continued to help push up both oil usage and economic growth. While Japan is expected to continue its long-term decline in consumption, signs of an economic turnaround in that country lead EIA to be less pessimistic about the Japanese decline in liquid fuels consumption for 2010-2011.  EIA's revised outlook is for global liquid fuels consumption to grow by 1.2 million bbl/d in 2010 and 1.6 million bbl/d in 2011 after showing annual declines in 2008 and 2009

Natural Gas Summary (EIA)
Working gas in storage was 2,215 Bcf as of Friday, February 5, 2010, according to EIA estimates. This represents a net decline of 191 Bcf from the previous week. Stocks were 172 Bcf higher than last year at this time and 114 Bcf above the 5-year average of 2,101 Bcf. In the East Region, stocks were 1 Bcf above the 5-year average following net withdrawals of 116 Bcf. Stocks in the Producing Region were 54 Bcf above the 5-year average of 682 Bcf after a net withdrawal of 60 Bcf. Stocks in the West Region were 60 Bcf above the 5-year average after a net drawdown of 15 Bcf. At 2,215 Bcf, total working gas is within the 5-year historical range.

Total marketed natural gas production declines 2.6 percent to 58.7 Bcf/d in 2010 and increases by 1.3 percent in 2011 in this forecast.  Working natural gas rigs hit a low of 665 in mid-July 2009, and EIA anticipates that the impact of lower drilling activity last year will contribute to the production decline in 2010.  While the number of working natural gas rigs is currently about 25 percent below the year-ago level, the number has increased during the last month by about 100 rigs to a total of 861 rigs at the end of January.  Current 2010 futures market prices between $5.50 and $6.70 per MMBtu appear to provide the necessary economic incentive to expand drilling programs even further.  As a result, EIA expects monthly natural gas production to begin to slowly increase later this year and continue on an upward trend through the end of 2011.

 

Gasoline and Diesel Fuel Prices Fall for Fourth Week (EIA)
The U.S. average price for regular gasoline fell for the fourth week in a row, dropping less than a penny to reach $2.65 per gallon, which was still $0.73 above last year. On the East Coast, the price decreased almost two cents to $2.67 per gallon. The Midwest average increased by over a penny to $2.57 per gallon, and Rocky Mountain prices rose by less than half a cent to $2.62 per gallon. Gulf Coast average prices fell almost 3 cents to $2.52 per gallon and remained the lowest regional prices in the Nation. The West Coast average dropped close to 2 cents to $2.90 per gallon and the price in California decreased over a penny to $2.96 per gallon.

Gasoline stocks above high end of the range for this time of the year and add in tax return season it would seem to be a postive vote for consumer spending.